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Blackstone Venture Said to Buy 25 NYC Apartment Buildings

Hui-yong Yu

July 22, 2015, 12:00 PM EDTUpdated on July 22, 2015, 3:41 PM EDT

A venture led by Blackstone Group LP agreed to buy 25 Manhattan apartment buildings for about $700 million in the private equity firm’s first purchase of rental housing in the borough, a person with knowledge of the transaction said.

The mainly midrise properties have about 1,000 units and are located primarily in and around the Chelsea and Upper East Side neighborhoods, according to the person, who asked not to be identified because the deal is private. Blackstone will have a majority stake in the apartments, which were built in the 1970s and ’80s, the person said.

The seller is the Caiola family, a New York developer. Blackstone’s partner in the transaction is Fairstead Capital, a real estate owner and manager whose principals include Stephen Siegel, Will Blodgett and a local family office. Siegel is chairman of global brokerage at CBRE Group Inc., the biggest commercial real estate services company.

Peter Rose, a spokesman for New York-based Blackstone, declined to comment on the deal, which was reported earlier by newsletter Real Estate Alert. Fairstead Capital and the Caiola family didn’t return calls.

Demand for apartments has surged, allowing landlords to push rents ever higher. The vacancy rate in the New York area averaged 2.7 percent in the second quarter, compared with 4.2 percent for the U.S. as a whole, according to research firm Reis Inc. In Manhattan, the median apartment rent was $3,369 in June, up 2.1 percent from a year earlier and the 16th consecutive increase, according to a report by Miller Samuel Inc. and Douglas Elliman Real Estate.

The city is facing a shortage of rental units, Jon Gray, global head of real estate at Blackstone, said on July 15 at the Delivering Alpha conference in New York.

The firm’s Invitation Homes division is the country’s biggest owner of single-family rental houses, with about 48,000 properties. Blackstone also has formed an apartment rental company called LivCor.

In the Manhattan properties, only 5 percent of the apartments are subject to rent controls, according to the person with knowledge of the deal. The largest building, at 250 W. 19th St., has 200 units, the person said.

(Updates with when the properties were built in second paragraph, Fairstead principals in third.)